Does anyone know what the IRS position on how low a plan sponsor can s

[Guest Frank Berrodin]

Does anyone know what the IRS position on the minimum normal retirement age in a defined benefit plan can be? All participants will be fully vested at all times and because the plan's assets will be invested so as to equal the interest credits (it will be a cash balance plan), the vesting and funding issues should not be relevant. We want to allow in-service distributions after normal retirement age and want to set normal retirement age as young as is permissable.

[AndyH]

Jim Holland said at the 1999 ASPA session that the IRS view's the plans NRD as irrelevant in cases where there is a clear pattern of retirement at later ages. There was a Q&A which I don't have in front of me which was the context for the comment. It had to do with an early NRA. Proceed with caution.

[Alonzo]

Also, see IRC 411(a)(8), which defines normal retirement age as "the time a participant attains normal retirement age under the plan".

I don't see how the IRS can disqualify a plan using a 5 years of service NRA until after it comes up with a Rev. Rul. that invokes the basic definition of pension plan found in 1.401-1(B) ("a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement"). The IRS has no creditable administrative tool against plans with these NRAs, even though they seem abusive.

[david rigby]

My understanding is that the cash balance plan of a very large bank (no. 2) defines NRD as the *earlier* of age 65 or 5 years of service. Supposedly, this plan has received a determination letter.

However, let me also express an opinion: This is contrary to the purpose of qualified plans in general, which is to accumulate long term assets or to provide retirement income. Permitting in-service distributions at early ages makes a mockery of the concept of retirement planning. Frank, I would be interested in knowing the reason(s) that the sponsor wants to make in-service distributions.

[This message has been edited by pax (edited 02-28-2000).]

[Everett Moreland]

Read Revenue Ruling 78-120.

http://www.taxlinks.com/rulings/1978/revrul78-120.htm